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NCPA Refutes Preposterous CMS' Claims About New Medicaid Reimbursement Rule

The Centers for Medicare & Medicaid Services (CMS) continues to make factually inaccurate claims about the harmful effects of the final rule for Medicaid generic prescription drug pharmacy reimbursement, according to the National Community Pharmacists Association (NCPA). In an article by Kansas City Star reporter Rob Hotakainen entitled "Pharmacies fear changes in Medicaid", there was a passage devoted to erroneous assertions by CMS spokeswoman Mary Kahn:

We don't agree with some advocates who claim that the new rule will put pharmacies out of business," said Mary M. Kahn, CMS spokeswoman. She said that states "were greatly overpaying for many drugs, especially generic drugs." And even with the new changes, she said, pharmacy revenues from the Medicaid program will decline by less than 1 percent over the next five years.

Medicaid fails to directly cover the cost to dispense generic prescriptions, which according to a 2007 Grant-Thorton study averages $10.50 nationwide. The average dispensing fee paid by state Medicaid programs is only $4.50. Furthermore, as prescription drugs represent 92 percent of independent pharmacies' revenue, coupled with average Medicaid populations of 16 percent, these cuts are projected to reduce independent pharmacies' net profit by 60 percent. This is according to information from the 2006 NCPA-Pfizer Digest-a comprehensive survey on the financial health of community pharmacies-and the Government Accountability Office (GAO) report on the reimbursement rule. In addition, the '1 percent pharmacy revenue loss over the next five years' claim by Ms. Kahn is based on projections from large, publicly-traded retail pharmacy chains such as CVS, Walgreens and Rite-Aid, which have a much larger stream of products they sell outside of prescription drugs in their stores.

Viewed another way, two independent government agencies-the GAO and the Health and Human Services Office of Inspector General (OIG)-have reviewed the data and concluded that the reimbursement rule will result in pharmacy underpayment, on average, being well below their acquisition costs. The GAO report places that figure at 36 percent below pharmacy acquisition cost. CMS dismisses both reports out of hand, but fails to provide data to refute the claims of these independent agencies. As CMS has made no AMP data publicly available, community pharmacists are forced to assume the worst: The CMS policy will force pharmacies to operate at a loss, which could force pharmacies out of business.

"There is a mountain of evidence indicating that the Medicaid generic reimbursement rule will have serious ramifications for community pharmacies and their patients," said Bruce Roberts, RPh, NCPA executive vice president and CEO. "Yet, CMS desperately clings to the discredited notion that its policy, designed to cut over $8 billion from Medicaid by targeting community pharmacies, will have a minimal impact. It's a shame because community pharmacies are on the front lines of our health care system providing valuable medication services, but those efforts will soon be compromised. That is why a congressional intervention in the form of a legislative fix is needed."

NCPA worked with allies in the House and Senate to introduce bipartisan bills in each Chamber to address the problem before going on their August recess. When Congress returns in September, there will be a strong push to get these bills passed, reconciled in conference committee, and signed into law before pharmacists and patients are affected in early 2008. The Senate bill is S.1951, the Fair Medicaid Drug Payment Act of 2007, and the House bill is H.R. 3140, the Saving Our Community Pharmacies Act of 2007.

If Congress doesn't act, the options for community pharmacies will be to limit or completely drop their participation in the Medicaid program, or in the worst circumstances, even go out of business. Patients and taxpayers alike will bear the brunt of the ensuing fallout. Patients in underserved rural and urban areas will have their access to prescription drugs curtailed. Patients' health also will be potentially compromised without access to cost-effective, life-saving medicines, ultimately leading to expensive emergency rooms and frequent doctor's office visits. The taxpayers will pick up the extra costs.

"Mary Kahn continues to convey CMS' unsound arguments that dramatically downplay the unfortunate consequences of lower generic reimbursement on Medicaid patients and small business pharmacy owners," said NCPA President John Tilley, RPh, a pharmacy owner in Downey, Calif. "Community pharmacies were not fooled by the disingenuous, defensive talking points when CMS issued its proposed rule and we won't be now that the final rule has been published. We can't afford to wait for CMS to stop its charade, which is why we are working aggressively with our congressional allies to return pragmatism and equity to the Medicaid pharmacy reimbursement system."

The National Community Pharmacists Association, founded in 1898, represents the nation's community pharmacists, including the owners of more than 23,000 pharmacies. The nation's independent pharmacies, independent pharmacy franchises, and independent chains dispense nearly half of the nation's retail prescription medicines.


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